The World Today for March 28, 2022
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Executives at France-based energy giant TotalEnergies recently announced that they would stop all Russian oil purchases this year in protest against President Vladimir Putin’s invasion of Ukraine. Russian oil accounted for 17 percent of the $190 billion company’s production, reported CBS News and the Associated Press.
Such moves, in addition to tough sanctions, CNBC wrote, are expected to result in the Russian economy losing the benefits of about 30 years of economic growth since the collapse of the Soviet Union, the original sin that motivated Putin to attack the former Soviet republic last month.
The Russian economy is expected to shrink 15 percent this year. Still, it’s funding its war mainly because of oil and gas sales. On Friday, American President Joe Biden announced a landmark deal with the EU in which the US will increase transatlantic gas deliveries in the hope of weakening the power the Kremlin wields thanks to its status as Europe’s main supplier of gas, the Guardian wrote.
Still, all of this is just one part of a larger set of economic changes that are occurring around the world as Russian forces shell Kyiv and attempt to seize Mariupol and other cities. As the Washington Post explained, the Russian-Ukraine War, another coronavirus outbreak in China and inflation have once again upended the supply chains, energy markets and other aspects of the world economy. Management consulting firm McKinsey recently predicted Britain and the US could face recession if the war, the resulting refugee crisis or inflation keep worsening, Insider reported.
Sanctions against Russian oil are constricting supplies, driving up prices at the pump, the New York Times noted. But the fighting has also disrupted Russian and Ukrainian wheat harvests. The two countries are major world suppliers, providing Egypt and Turkey with 70 percent of their grains, for example. India imports significant amounts of sunflower and other edible oils from the region, too. Those staples are now more expensive and harder to secure due to the war, Deutsche Welle added.
In the journal Nature, experts warned of the need for concerted international action to avert a humanitarian food crisis in poorer regions of the globe due to the conflict in Eastern Europe.
The International Monetary Fund mused that such changes could result in a significant reorientation of national economies and world trade. This IMF Blog illustrated how different regions were handling the situation: For example, sub-Saharan Africa was on its way to recovering from the pandemic but the spillover effects of this war threatens that progress, the IMF wrote, especially because of higher energy and food prices, reduced tourism and potential difficulty accessing international capital markets.
“The war may fundamentally alter the global economic and geopolitical order should energy trade shift, supply chains reconfigure, payment networks fragment, and countries rethink reserve currency holdings,” Fund analysts wrote, according to Reuters.
Business is forcing politicians to ally or distance themselves from each other. Saudi Arabia’s potentates, for example, find themselves allied with Russia in preferring the price of oil to increase. But, at the same time, they must contend with their traditional friends and protectors, the Americans, Al Jazeera reported.
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